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Remeasurement of the lease liability This occurs when the lessee reassesses whether it is reasonably certain to exercise an option to extend the lease or to purchase the underlying asset, or not to exercise an option to terminate the lease early.

A lessee shall remeasure the lease payments if any of the following occur: a. . . . b. A contingency upon which some or all of the variable lease payments that will be paid over the remainder of the lease term are based is resolved such that those payments now meet the definition of lease payments.

The old rules measured the difference between operating leases and capital leases included in the balance sheet.The distinction in the new rules relate to contracts because an actual lease may not exist or the agreement may not be called a lease.

Under ASC 840, land is separately classified when the fair value of the land is 25% or more of the combined fair value of the land and building. Under ASC 842, the determination of whether or not a contract is a lease or contains a lease is done at the inception date.

Examples of Triggering Events for Lease ReassessmentsConstruction of significant leasehold improvements. Subleasing an asset for a period beyond end of the current lease term. Significantly modifying or customizing the asset. Making a business decision directly relevant to option exercise.

ASC 840, Leases, is the former lease accounting standard for public and private companies that follow US GAAP . Under ASC 840, leases were classified as either capital or operating, and the classification significantly impacted the effect the contract had on the company's financial statements.

A lease modification is defined as a change in the scope of a lease, or the consideration for a lease, that was not part of the original terms and conditions of the lease.